Is Grand Forks Retail Symptomatic of the Future for the US?

The recent announcement of the closure of Sears in Grand Forks brings up one of the tried and true topics for me on the Jarrod Thomas Radio Show (KNOX, 1310 AM Grand Forks): what is happening to the retail landscape in Grand Forks? I am sure this is a topic I will be talking about on the radio tomorrow (special time this week).

At one level this question is moot. People in Grand Forks should not care about the retail environment in the rest of the country, only what is happening in their own backyard. However, the local issues are, to some extent, similar to nationwide issues within retail. Given the already problematic retail picture in Grand Forks, the loss of any retail establishment is potentially troubling. Without jumping into data we will take a bit of a deeper look at what seems to be happening here.

For full disclosure I do not think I set foot in Sears, here or anywhere else, in the last decade, and if I did it was more than likely a mistake and I was lost. There is probably not one thing that is problematic for Sears, nationally or locally. The biggest issue in retail is the degree of competition. It is intense to say the least. I remember when I worked for a garbage company that Sears was the only choice for work clothes (jeans, gloves, shirts, boots). They were tough and durable and helped me get the job done with a minimum of stuff left on me. Now there is Home Depot, Lowes, Menards, Target and Walmart all competing in the same area and quite effectively too.

Margins are thin in retail right now and even with a quality product it seems to be a volume game. You need to move units to generate profits, and if nationally the situation faced by Sears is the same as local, it is not a game they were playing well. Most people I know went to Sears as a last resort and had no positive stories about the shopping experience, from not finding products to not finding people to assist them. So let’s sum this up in issue number 1: you need to sell people a product they want buy. If you are not doing that it is pretty much the case that nothing else matters. And all that I hear is that Sears lost its way there.

A second issue brought up by JT was the future of the mall and whether the Columbia Mall was a contributor to this. My answer here is a shoulder shrug. Who really can tell. In some ways mall dynamics are changing across the country. The Cathedral to Consumerism (my name for the Mall of America) has more than 500 stores. The highest estimate I find for the Columbia Mall is 70. In square footage the Columbia Mall (where Sears was an anchor) is on the small end of large malls. At some level I would fault the design of the mall. You can go into anchor stores (only 2 left of the 4 spots) without venturing to the rest of the stores which reduces the advantages to locating stores into the mall.

It is about scale and agglomeration. You need space and product offerings. It also helps to be near a variety of other stores that are not competitors, or if they are that you can compete against effectively. Going to the mall used to be an opportunity to go and shop for two things you could not find in one store and browse other stores. It is not that anymore and that is a problem. I see more teens hanging out and browsing the SuperTarget in Grand Forks than the Mall.

The ultimate irony here is that Sears, the company famous for the Sears catalog, and one of the first stores known for selling at a distance to a diverse clientele, seems to have lost its way in the internet age. JT thinks that this might be overplayed here, that people still want to come in and see a lawnmower before purchasing. He might be right, but there are lawnmowers on Amazon with thousands of reviews so it seems that might be changing along with everything else.

One of the bigger worries for Sears also needs to be that stores such as Macy’s had good first fiscal quarters. That is a sign that changes can work, but that you are behind and maybe already lost key clients you want to keep frequenting your store. In addition, tax changes and labor market dynamics indicate higher incomes for individuals and you still have issues. Closing stores may not be enough for the company.

For Grand Forks, if the stories I hear are accurate, this will not be a big hit to local retail. People apparently did not shop there anyway. It does potentially hurt the Columbia Mall though from the perspective of losing another retail establishment and opening even more square footage. At some point the amount of available commercial space needs to become a focus for policymakers. What is happening to commercial real estate prices with this amount of available space? What is going on with local dynamics (demographic and income to name my top two) that make us less desirable to retailers of local origin or national origin? These are vital questions that need answers fast.

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